Analyst: Industry 'Cleaning up' on Environment

Jun 06, 2008

Some industry sectors are posting impressive profits from America's poor environmental progress, including waste collection and management companies, recycling facilities, and environmental consultants, according to IBISWorld, Inc., an independent publisher of business intelligence research.

"On the backdrop of World Environment Day on June 5, environmental habits and recycling efforts in the U.S. lag far behind European nations," said George Van Horn, a senior analyst with IBISWorld. "Our latest reports reveal that as a nation, Americans generate more waste than any other nation in the world – an astounding 4.5 pounds of municipal solid waste (MSW) per person per day, 55 percent of which is contributed as residential garbage." He added, "The remaining 45 percent of waste in the U.S.'s 'waste stream' comes from manufacturing, retailing, and commercial trade in the U.S. economy."

And of the 245,700 million tons (up from 88 million tons in 1960) of the MSW that Americans produce each year, only 32 percent is recycled or composted. By comparison, around 70 percent of the MSW in Germany and Norway is recycled or composted.

The United States accounts for only 4.6 percent of the world's population yet produces nearly a quarter of all carbon dioxide emissions, compared with China, a nation with approximately 1 billion people, or 21 percent of the global population but only 13 percent of the world's carbon dioxide emissions. This will soon change as carbon dioxide emissions in China and India are expected to soar in the next few years as both nations' economies grow, producing a larger middle class, rapid increases in consumption, and more carbon dioxide emissions. European Union countries, which make up 6.3 percent of the world's population, produce 14 percent of global carbon dioxide emissions.

Over the past four years, electricity consumption in the United States has risen 1.46 percent between 2004 and 2008 (figures in millions of kilowatt hours a year).

IBISWorld estimates that the typical single-family home consumes 69.3 gallons of water per day. These figures are alarming in some parts of the country where water supplies are dangerously low due to drought, particularly in the West and the Southeast.

While copious consumption in the United States points to poor performance on the environmental front, the country's excessive waste production is good news garbage collection – with many communities demanding expanded collection, recycling, and disposal services, and large companies jumping at the chance to boost revenues.

"This year, the waste collection industry's revenue rose 4.5 percent to $39.87 billion, following several strong years in terms of increased demand for waste management services," said Van Horn.

"Major players making the most out of our wasteful ways include larger companies that are vertically integrating their waste management services to include collection, recycling, transfer, and disposal services, which boost their advantage when tendering for collection contracts," said Van Horn.

Although it may seem that community and government pressure to reduce waste at its source would be bad news for the wider waste industry, new initiatives, such as those in California, and New York move to raise their requirements for a set amount of waste to be diverted from the waste stream from 50 percent to 75 percent – a change that can produce healthy profits for companies that collect and process recyclables. Growth has exceeded 7 percent per year for the past five years due to rising waste volumes and increasing recyclable commodity prices.

"Firms engaged in environmental consulting have done particularly well in recent years," said Van Horn. In fact, industry revenue is expected to hit $12.6 billion in 2008 – up 9.7 percent from 2007. Next year will be even better with industry revenue forecast to rise another 11.3 percent to $14.07 billion.

IBISWorld reports that while the energy industry is central to the problem of climate change, it may end up a major financial winner by focusing on producing energy through geothermal sources, windmill farms, solar energy, and other developing technologies.

"Ethanol production will continue to expand as biofuels attract increasing attention as an alternative energy source, and we may see investment tax credits for the construction of bio-refineries to convert cellulose to transportation and other bio-based products," said Van Horn.